The Fed will be gratified | 23 Juni 2023

#SP500:

U.S. equity funds have attracted $38 billion during the past three weeks, which represents the strongest stretch since last October. Money market funds witnessed their first outflow in roughly two months. Small-cap mutual funds attracted $4.8 billion in the latest week, which represents the largest inflow since last June. Technology fund flows are the standout as they have attracted $19 billion in the past couple of months, representing their best run since March 2021. Markets have witnessed a notable improvement in market breadth and recent fund flow data support the recent market moves. The Fed last week ended its run of 10 consecutive rate hikes when policymakers decided to keep the benchmark overnight interest rate in a range of from 5% to 5.25%. But they also issued new projections showing 12 of 18 Fed officials see rates rising at least another half point by the end of the year. This is a negative signal for the stock market.

Trading recommendation: sell 4448 and take profit 4340.

XAUUSD:

U.S. consumers' near-term inflation expectations dropped to more than a two-year low in June and the outlook over the next five years improved slightly, according to University of Michigan's survey. The Fed will be gratified that the surge in inflation expectations in the late-1970s and early 1980s has not been repeated. With inflation subsiding, though still above the Fed's 2% target, financial markets are betting that the central bank will raise interest rates only one more time this year, according to the Fedwatch tool. The Fed has delivered 500 basis points worth of rate hikes since March 2022, when it embarked on its fastest policy tightening cycle in more than 40 years.

Trading recommendation: sell 1970 and take profit 1919.

#WTI:

Oil rose, cementing a gain for the week, as macroeconomic trends suggested stronger demand globally. Crude has gotten a lift from signals that China’s usage will continue to grow, indications that the US driving season will be robust and expectations that the Federal Reserve’s pause in interest rate increases will provide the economy some temporary relief. Still, the rally is being capped as stockpiles continue to swell despite Saudi-led OPEC+ production cuts. The production cuts, along with lost Russian barrels and wildfires in Canada have contributed to tightness in the heavy, sour crude market, but that has been partly balanced by ample availability of light, sweet grades from US shale producers.

Trading recommendation: range 69.50 -72.90.